CARP Poll: Urgent need to enhance CPP and improve PRPPs

Toronto, ON: CARP members call for a retirement savings vehicle that they would actually use and reinforce CARP’s call on the Finance ministers meeting next week to materially improve the PPRPs and move now on their promised CPP-enhancement.

Nearly 2,000 CARP members responding to a weekend CARP Poll generally liked the idea of a pooled retirement savings plan like the Pooled Registered Pension Plans but when asked if they would contribute to it, or would have if it had been available when they were working, they were much more discerning. 72% said they would not contribute to PRPPs as they are now, with no hard fee caps, no target return and no employer contributions and privately managed.

“The whole point of this pension reform exercise is to get more people saving more for their own retirement. Our members say unequivocally that PRPPs as they are structured now would not do that. That’s why we are calling for the changes that they say would actually convince them to contribute”, said Susan Eng, VP, Advocacy for CARP

When asked what would have convinced them to contribute, employer contributions or a guaranteed or target benefit topped the list. Nearly all [85 – 87%] said either of these provisions would have made it more likely for them to contribute. Regulated low fees were important to them too [59%] but not as dramatically.

CARP members also voiced strong support of CPP enhancement together with improved PRPPs. 57% favoured a combined public [CPP] and private [PRPP] option but nearly a third more said that a public option was essential. More than half were more likely to contribute to a plan if it were managed by a public sector body like the CPP Investment Board or a provincial teachers’ fund.

Most want some enhancement of the CPP, whether a modest enhancement or a substantial enhancement and they think that it’s urgent that the finance ministers act now.

More than two years after the finance ministers acknowledged that Canada’s pension system needed reform and that government had a role to play by proposing a pooled pension arrangement together with a modest enhancement to the CPP [June 2010], only federal legislation to establish the PRPPs has been enacted [June 28, 2012] which applies only to federally regulated workplaces. And, no progress has been announced on the promise to enhance the CPP.

The provinces have the upper hand to hold out for improvements to the PRPP design and to increase the CPP. Provincial legislation is required to allow all other workplaces to establish any such pooled arrangement. A consensus among all the finance ministers is necessary to ensure national uniformity and portability of the provincial PRPPs and a virtual consensus is required to change the CPP.

In December 2010, CPP enhancement was apparently abandoned when Alberta and Quebec refused to join the other provinces to move on amending the CPP. However, in the November 2012 Quebec budget statements, CPP/QPP enhancement was mentioned in favourable terms. By our calculation, Quebec’s concurrence in enhancing the CPP would be sufficient if added to the other provinces’ to meet the two-thirds’ of the Canadian population threshold to amend the CPP.

Meanwhile, it is understood that financial institutions are ready to roll out their PRPP offerings and need the provincial enabling legislation enacted as soon as possible.

“This is the time – maybe the only time – that the provincial Finance ministers who have told us that they favour a CPP enhancement and better safeguards in the PRPPs, will have the leverage to actually fulfill their promise to provide a secure retirement for future generations,” added Eng.

CARP is a national, non-partisan, non-profit organization committed to advocating for a New Vision of Aging for Canada, social change that will bring financial security, equitable access to health care and freedom from discrimination. CARP seeks to ensure that the marketplace serves the needs and expectations of our generation and provides value-added benefits, products and services to our members. Through our network of chapters across Canada, CARP is dedicated to building a sense of community and shared values among our members in support of CARP’s mission.